\nThe ONE Group Hospitality, Inc. (\u201cThe ONE Group\u201d or the \u201cCompany\u201d) (Nasdaq: STKS) today reported its financial results for the first quarter ended March 31, 2023.<\/p>\n
Highlights for the first quarter compared to the same period in 2022 are as follows:<\/b><\/p>\n \n\u201cWe are pleased with our first quarter results which include double-digit top-line growth, positive comparable sales, and growth in adjusted EBITDA. We are particularly happy with STK restaurant level margins in excess of 22% for the quarter. Importantly, we are still on track with our robust development pipeline, and we remain confident in our full year 2023 targets and are reiterating them today,\u201d said Emanuel \u201cManny\u201d Hilario, President and CEO of The ONE Group.<\/p>\n \nHilario continued, \u201cWe expect to open eight to twelve new venues this year, representing our strongest development pipeline in history. During the first quarter, we opened a new, redesigned Kona Grill in Columbus and a rooftop bar at our existing STK in Scottsdale. We view our addressable market as at least 400 restaurants including 200 STK restaurants globally and 200 Kona Grills domestically with best-in-class ROIs of between 40% and 50% for new Company-owned STKs and Kona Grills, respectively.\u201d<\/p>\n *Comparable sales represent total U.S. food and beverage sales at owned and managed units opened for at least a full 18-months. This measure includes total revenue from our owned and managed locations. <\/i>The Company monitors sales growth at its established restaurant base in addition to growth that results from restaurant acquisitions.<\/i><\/p>\n **We define Adjusted EBITDA as net income before interest expense, provision for income taxes, depreciation and amortization, non-cash impairment loss, non-cash rent expense, pre-opening expenses, non-recurring gains and losses including incremental costs related to COVID-19, stock-based compensation and certain transactional costs. Adjusted EBITDA has been presented in this press release and is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. Refer to the reconciliation of Net Income to Adjusted EBITDA in this release.<\/i><\/p>\n ***We define Restaurant Operating Profit as owned restaurant net revenue minus owned restaurant cost of sales and owned restaurant operating expenses. Restaurant Operating Profit has been presented in this press release and is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. Refer to the reconciliation of Operating income to Restaurant Operating Profit in this release.<\/i><\/p>\n ****<\/i>We define Adjusted Net Income as net income before COVID-19 costs, lease termination expenses, one-time stock-based compensation, non-recurring costs, non-cash rent during the pre-opening period and the income tax effect of any adjustments.<\/i> Adjusted Net Income has been presented in this press release and is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. Refer to the reconciliation of Net Income to Adjusted Net Income in this release.<\/i><\/p>\n First Quarter 2023 Financial Results<\/b><\/p>\n \nTotal GAAP revenues increased $8.4 million, or 11.3%, to $82.6 million in the first quarter of 2023 from $74.2 million in the first quarter of 2022.<\/p>\n \nTotal owned restaurant net revenues increased $8.1 million, or 11.4%, to $78.6 million in the first quarter of 2023 from $70.5 million in the first quarter of 2022. The increase was primarily attributable to the addition of STK San Francisco in August 2022, STK Dallas in November 2022, and Kona Grill Columbus in January 2023. Consolidated comparable sales* increased 1.6% compared to the first quarter of 2022.<\/p>\n \nManagement, license and incentive fee revenues increased $0.3 million, or 8.5%, to $4.0 million in the first quarter of 2023 from $3.7 million in the first quarter of 2022. The increase was primarily attributable to increased revenues at our managed STK restaurants in North America.<\/p>\n \nRestaurant Operating Profit*** decreased $0.1 million, or 1.1%, to $12.9 million and represented 16.4% of Company-owned restaurant net revenues in the first quarter of 2023 compared to $13.0 million and 18.5% of Company-owned restaurant net revenues in the first quarter of 2022. The decrease was primarily due to consolidated higher average wage and operating cost inflation.<\/p>\n \nTotal owned operating costs represented 83.6% of Company-owned restaurant net revenues in the first quarter of 2023 compared to 81.5% of Company-owned restaurant net revenues in the first quarter of 2022. The increase was primarily due to consolidated higher average wage and operating cost inflation. Total owned operating costs are typically higher in the first quarter due to seasonality in sales levels, and we anticipate total owned operating costs for the full year of between 82.5% and 82.0%.<\/p>\n \nGeneral and administrative costs increased $0.6 million, or 8.8%, to $7.5 million for the three months ended March 31, 2023 from $6.9 million for the three months ended March 31, 2022. The increase was attributable to increased stock-based compensation expense and additional investments required ahead of growth. As a percentage of revenues, general and administrative costs were 9.1% for the three months ended March 31, 2023 compared to 9.3% for the three months ended March 31, 2022.<\/p>\n \nPre-opening expenses were $1.3 million for the three months ended March 31, 2023 compared to $0.3 million for the three months ended March 31, 2022. The increase was related to payroll, training, and non-cash pre-open rent for Kona Grill Columbus which opened in January 2023 and STK and Kona Grill restaurants currently under construction.<\/p>\n \nGAAP net income attributable to The ONE Group Hospitality, Inc. in the first quarter of 2023 was $2.6 million, or $0.08 per share, compared to $3.7 million, or $0.11 per share, in the first quarter of 2022.<\/p>\n \nAdjusted Net Income**** attributable to The ONE Group Hospitality, Inc. in the first quarter of 2023 was $3.2 million, or $0.10 per share, compared to $5.0 million, or $0.15 per share, in the first quarter of 2022.<\/p>\n \nAdjusted EBITDA** increased $0.1 million, or 1.0%, to $10.9 million in the first quarter of 2023 from $10.8 million in the first quarter of 2022.<\/p>\n Restaurant Development<\/b><\/p>\n \nThe Company intends to open eight to twelve new venues in 2023.<\/p>\n \nThere are currently three Company-owned STK restaurants (Charlotte, NC, Boston, MA and Washington, D.C.) and two Company-owned Kona Grill restaurants (Riverton, UT and Desert Ridge, AZ) under construction.<\/p>\n \nDuring the first quarter of 2023, the Company opened a redesigned Kona Grill in Columbus, OH and a rooftop at an STK in Scottsdale, AZ.<\/p>\n Share Repurchase<\/b><\/p>\n \nOn September 7, 2022, the Company announced the commencement of a share repurchase program for up to $10 million of its outstanding common stock. The Company\u2019s board has authorized an additional $5 million to this program. In the quarter ended March 31, 2023, the Company purchased 0.1 million shares for aggregate consideration of $0.7 million. As of March 31, 2023, the Company had purchased 1.2 million shares for $7.9 million under this program.<\/p>\n 2023 Targets<\/b><\/p>\n \nThe Company is reiterating the following targets for 2023:<\/p>\n\n